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A real house flipper with over 300 projects completed brainstorms specific ideas and strategies in the Real Estate Investing world. Usually centering around the Rehab portion or how to use the rehab to get a better deal on the purchase of a house.
I've asked chat gbt to play the role of Joe Rogan and asked me 25 questions about flipping houses and holding real estate long term now I've been flipping houses for almost 15 years now so hopefully I can answer all of these for you and stay tuned number one can you walk us through your first house flipping project and what lessons you learned from it well I kind of had multiple starts see when I was really young like in my late teens maybe I was in my early 20s is when I bought my first real estate investment and that one I held as a rental at the time because I had a nice corporate job and I was able to you know put the money down and hold the thing long term and I actually had gotten moved around with my job as well and so that was start number one and I continued to buy real estate through that time with my corporate job and when I would buy those houses I would do some DIY work and I really didn't know a lot at the time you know I knew how to landscape and paint and make things nicer and so that's what I would do it things that I knew how to do myself put new hardware on I wouldn't even do things like floors at that time I didn't know what I was doing well enough to be able to do that Landscaping I'm not sure if I said that already and then there was the first house where I was going to be a house flipper where I actually left my nice corporate job to do the thing fulltime and that's kind of when I consider my first foray into house flipping as a profession see there's like two sides of it there's the business side that's the house flipping and that's how you make your daily grocery money your 9 to-5 money as a house flipper and then there's the investment side that's where you're a real estate investment investor and you buy rental real estate to hold in your portfolio over time and that's really what anybody should be trying to get to you know the thing with house flipping as a business is you need to just like any business you have to either press your foot on the gas to make it turn revenue for you or you need to build the team to keep the foot on the gas whereas with rental real estate it is just the gift that keeps on giv I mean you know that's not what this question is about but there's just nothing better I talk about that all the time there's no better way to become wealthy especially as an everyday person like myself than real estate so let's talk about the real first time becoming a house flipper where I left my job well the this is one where I thought that what you had to do was a big renovation to be a house flipper I was you know confused I guess by the things that are that you see on TV and reading the forums and all that I didn't realize there were other strategies out and so I thought I had to do a big project so I bought this house that was really crappy and I tore the roof off of it and build a second story on it you know being doing a pop top to add square footage and you know I made a lot of money off of it but it took me 550 days straight to do I was learning all throughout how to actually do construction I bit off way more that I could chew and then had to find a way to back it up I mean I lost all kinds of money to get to the end of the project like I had to sell my truck to get to the end of the project I slept in the backyard of this project so I could get it to the finish line and you know it was like I would spend one day building then I'd spend the next day realizing that I messed it all up and had to go redo it again so it took me three days three or four days for every day of progress great experience but it's definitely not the way that I should have done it I mean there were so many lessons that I learned off of that and I forget what lessons I learned at that time and what lessons I've learned in hindsight biggest lesson I learned in hindsight is that the money I made because at closing I did put money in my pocket 200 Grand which was a great start to my career in that I later lost all that but the biggest lesson in hindsight is that that $200,000 that I gained was from buying a good deal on the front end and an appreciating Market in the right neighborhood and that $200,000 came from the market wave that I was writing up not really because of the construction I did and I did like a really nice job it was a beautiful house that's not the way I made the money there I made the money because it took me 500 on to chat GPT question number two this is going to be a long day how do you assess a property to determine if it's a good candidate for flipping well every property could be a good good candidate for flipping there's seven different strategies like I said and we've gone through we've gone through each one of those seven flipping strategies in a different video and it all comes down to if you get a good deal on the front end a good deal in correlation with the strategy that you're going to have it ultimately comes down to knowing the four controls of real estate that's the acquisition the strategy the project the work that you're going to do carrying out the strategy and then the market knowing what it's going to sell or rent for and you really have to understand each one of those controls to understand if you have a good candidate for flipping really but ultimately it comes down to am I going to make money on this project you know I get a lot lot of people who ask me you know I got this deal here that is is uh blah blah blah blah blah blah blah do you think it's a good deal and my first question all the time is are you going to be under market value during when you buy it and throughout the whole project are you always going to be in a position to be able to sell it for more than you have in it and if the answer is yes it's a good deal and if you're holding it the question is when you conservatively underwrite the deal and you account for maintenance and uh other repairs and taxes and insurance and closing costs and so on and so forth after you've accounted for all of that stuff your interest your principal interest taxes Insurance uh after you've accounted for all those things and vacancy do you have a dollar left over does the rent that you're getting paid over time equal a dollar more a month than you have to pay out when you include all those things if so it's a good deal and the game is acquiring as much property as you can and holding it till they pry it from your cold dead finger tint so if you can meaning the cost per month is less than the revenue that you get per month good to go buy it and in the flip always be below what you could sell it for that is to say there's never a situation where well hey I got all these terms and stuff so uh you know it makes it really easy to be able to take down you know no money down I did some seller financing the only catch is I'm buying it for $10,000 over market value no not a good not a good thing to do because then you're just speculating you're speculating that over time you know over the next not time in long term but time in like within the next year that that property will appreciate and then you will have it for less than its market value that's speculation you don't know what's going to happen to the market tomorrow you know what's happening today and you know how you're going to be able to force Equity into it by a renovation or by some other means three what are the most common challenges you face during a rehab project and how do you overcome them well I guess there's two things that you really run into and that's when you find things inside the wall or under the floor or whatever you know your scope creeps and two is the contractor's black hole where the contractor just vanishes on you or tries to get you in one way or the other you know not saying they're doing it by uh bad intentions it just it is a common thing it happens with the finding things inside the wall two things you need to do is you need to always have a financial content if you think that project's going to cost you you $50,000 to complete make sure that you have escrowed 60,000 or more at least 20% two is get better at seeing what's inside of the walls we do a lot of these scopes of work in real time and you can see we go through these properties and there are just so many signs you know you find these clues that tell you what's actually going on with that property and you know that's how you become an advanced real estate investor by being able to see those Clues and knowing what they actually mean and you really can see most most of the things that go wrong with and you know that's the thing that scares people from getting started in real estate is that they're scared that they're going to find these issues inside walls and stuff and there's just not that much that can catch you if you have done those first two things set a financial contingency and learn how to look inside of the wall and just one more thing is how to deal with these ch orders that are going to come about the problem is a lot of times not a lot of times sometimes contractors will win a job or a project a bid for multiple jobs inside of a project and the game could be is not always but could be that they win that bid at a low profit margin to themselves knowing that these changes will come up and these changes are where they can really make their money if that is a thing that's happening the you have to check it you have to keep people in check and the way that you do that is maybe on certain things that come up you say something along the lines of hey you know I have this other contractor who for whatever reason I don't know how you guys set up your businesses he can do that type of job super cheap and I just really want to have him come check it out so generally I don't do the three bid thing but if I feel like somebody's trying to press up a PR that's when I'll bring somebody else in but this is all about the uh disagree without being disagreeable so you see how I would introduce that thought not uh I wouldn't do it aggressively like man that's a high bid I'm not going to deal with that kind of stuff you know I'm going to bring somebody else in that's not a great way to build relationship Capital which is what you always want to be doing with these contractors now I said that there were two common challenges first one one is that you have these surprises that come up second one is the contractor's black hole which is where the you know a contractor wins the bid you award them that contract and then they stop showing up to the job site or whatever it's not that they've totally ghosted you it's kind of like taking a really long time to push things forward and with that you just have to you have to first before this started set a good Vision cast a great vision and set expectations on the time and the money then you just have to hold accountability there set some sort of ultimatum for La of better work as an example contractor is doing floors they're currently doing floors and you want to be really reasonable here you don't want to let your frustrations control this conversation you want to let your logic run the show here and so you know doing floors in this house shouldn't take two weeks you know if they really put all their bandwidth in it they could have it done in a couple days so I would say something like two weeks to be very reasonable to them give them a chance to really win and I would make sure that I have not let my emotions get the better of me and it actually is a situation where they're pushing it off saying oh yeah I'm going to come do those floors on this day oh I'm going to come do these floors I'm going to come do these floors and they're not doing it and I would say hey I'm sorry but I got to keep this project moving forward and I've had a lot of trouble getting you here to do the floors and what I'm going to do is I'm going to set a date which is two weeks in advance that's plenty of time for you to do those floors if the floors aren't done by that date I'm going to have to move you off this project and move somebody else in we'll settle up on the pay for the work that you've already completed and you make sure that's in writing and uh then you just stick to it that that's how you deal with it it's just uh uh you got to set that hard line otherwise the line just keeps getting pushed number four could you describe your process for budgeting a rehab project well unfortunately with these types of rehab projects you don't get an exactement so exactement is actually a brand and it's what insurance company and they'll go in there for like a whole day and measure out everything and make this perfect plan exactly what it's going to cost and I've actually tried that method before and you know the issue is that you're just going through so many properties all the time and and uh you don't have time to do all of that for every house that you're going to look at in fact we look at multiple houses per day to see if it's even a deal worth pursuing so you have to have a faster way to do this and really with this exactement thing as the opposite end of the spec that work works for houses that are like higher end and well put together because you're not going to have as many surprises they're like lived in houses where you can see that the foundation I'm not actually talking about the foundation I am but I'm talking about more than just the foundation like the bones and the foundation the infrastructure of the house somebody's been living there so you know that the infrastructure is Set uh whereas like a lot of these houses that we'll buy off Market especially in these tertiary markets are like really run down have it been livable uh you know have it been lived in for years sometimes and you just really don't know what you're going to run into until you get into walls and what I found as a better method is to make sure I have all jobs accounted for every task that I can foresee there and then I set budgets and those budgets are really based upon labor and manday and you know we have a whole uh database set up on you know what things should cost and but they're not hard costs in my view they are budgets and where and then it's really about Landing the plane it's just so much different in the rehab game than it is in like bigger Contracting it's not the right word there's just lots of different types of construction lots of different types of contra trors and people tend to group them all up into the same one but like the types of guys that do these types of projects for Flippers and Real Estate Investors they're just kind of a different uh breed for lack of better words they're not like the commercial guys that come in with like well put together bids and so on and so forth they it's kind of like back of napkin uh text messages and like verbal and handshakes that's how a lot of business is done in this field and you know they don't look at they don't walk in some do but I think it's all based upon the same thing that they don't walk in and they say oh well that's x amount of square feet and it's this many dollars per square feet therefore here's your price it's more like I have a couple guys and I think it's going to take us a week to do this and uh this is what I need to pay my guys for a week and this is how much money I need to make off of this and here's your price and really those guys who have the price per square foot thing it is really set then on how much they think they can get for that and then the other part is figured into their system so you end up overpaying for for that job is the way that I see it with all that being said I find that the best way to budget for my rehab project is to set a budget for each one of these line items and ultimately each one of these line items fit into different checkpoints on a project so there's six checkpoints on each project and it has a budget you know which is a compilation of each one of the jobs that are inside of that checkpoint or phase as we call and then I manage I manage the budget if I can't get this job done for what I budgeted it for it's going to be a little bit more then I go find ways on the other jobs in that checkpoint to say save the money so that way I can ultimately come out of that phase at the price that I budgeted it for and if I don't then I have the next five phases to try to make it up and so I might adjust what I'm doing throughout the project and you know another thing is that you generally don't get people to bid that far out on a project to where it's like they're bidding for phase six when you're in phase one you really have to wait till you get to phase six before they're going to bid it because it's just not the way these types of contractors work you know that's like how commercial contractors work people you know they're well put together they're well put together companies and they have organizations the problem is you pay for that stuff and in this game of you know more razor thin margins like you might find in house flipping you really want to go straight to the source you really want to miy these projects manage it yourself number five what's the importance of location When selecting a property for investment and what specific characteristics do you look for in a neighborhood I mean this one's simple any house anywhere any time could be a great flip if you get the acquisition price right versus the strategy and the project that you're going to carry out versus the arv you know the four controls if it works it works there are some areas that tend to work better for instance on rentals I'm looking for like C to B Class areas that have uh room to appreciate all properties are going to appreciate over time unless we have a total market failure which in that case like the whole game's different anyway and so throw it all throw it all away so if the economy continues like it always has or always as we know always then all of it will appreciate over time but in these like B and cclass areas you'll get a a boost as well so you're kind of like here's the line but these are kind of below the line so at some point you'll get like a nice boost to catch up with the main line and so I in accelerating your wealth you want those bumps and also you there's other bumps that are created in this forced Equity a rehab project so you get the bump right off the bat then you get a bump because that area takes off and then you get the continual movement of the real estate market six can you share some strategies or Technologies you use to streamline your construction projects well through the years I've used all kinds of different stuff you know we build we try to build everything into a system and you know it's funny that I say that because I also talk a lot about how variable the flipping and Rehab game can be but I believe that what you're always trying to do is create a um a main path and you're going to you know these things are going to take uh side roads but you're always coming back to this main path and that's what you're trying to do in these systems you know that they're not going to work out perfectly all the time but you can you can have your home base to come back to especially hard to carry out systems in the blue collar world is much different than the white collar world people aren't as accustomed to working with softwares and Technologies and so you really have to figure out ways to incorporate the things that the other people are using I I think about this a lot like okay so I have air table is what I use a lot of to build these databases and uh to keep our systems in check we also use notion for certain things we use an array of things todoist is another popular one for different pieces and I know it's weird you string together all these different Technologies but some are better for certain things and you you know the glue that holds them all together are automations like zapier anyhow talking about these guys out in the field you know these guys are working and they're not going to pull up their computer to pull up air table and I don't care who you are you're just not going to get people to do that consistently throughout time and that's what you need is consistency to a simple system is way better than these complex systems that it takes a multiple courses to be able to understand how to use so we try to make very simple things and we try to integrate apps that our people will use that the people in the field will use I think that it's uh maybe even disrespectful to ask a subcontractor to use your software like they have to learn to use this it's just you should be using things that they use and you figure out how to fit it into your system so what is an app that everybody uses iMessage text message um people use text message everybody uses text message and so uh you know we build a lot of things around how we screenshot text messages you know that's how we do a lot of bidding is through text message because we know we can at least get people to use that there are some like I hate to say more advanced contractors that actually use email and that is just the reality of it and so instead of trying to change that we change our our systems to fit what the reality is seven how has owning a construction company given you an advantage in the real estate investment market we've talked about this for controls acquisition the strategy the work the market the work that's actually Landing the plane of your strategy so your strategy might be that you're buying the property you're going to rehab it and then sell it so the rehab is the work and uh that is like the defense you make this strategy that on paper it works and then you need your defense to make sure that actually happens and you have to put up a heck of a defense to keep things in line there and you know that's different than when I first started out cu when I first started out I thought that the construction was almost like an offense you know I would be able to where everybody else was paying $50,000 for a renovation I'd be able to do it for 60% that price and it's really just not true I uh have come to understand that there is just a market price to do construction and there are like some strategies to get things done cheaper but you really end up paying for it uh in one way or another and we've done a whole video on the hidden cost of uh Renovations and you know it's things like your the cost to your bandwidth is just so high when you try to get cheaper people to work or it comes back and bites you in other ways you know where you have to go back and fix things that got messed up and so really there's just a market price and that market price really comes down to three things men hours material and markups so manh hours is basically the same everywhere maybe a little bit more in certain places but negligible materials that's the same markups that's where it's different supply and demand in different areas that you're in and you know if you work hard enough you can find uh you can find contractors whose balance of supply and demand is more in your favor and you don't have to be a contractor to do do that you can be just an investor that uh finds those people but the owning a construction company has open my eyes to all where they wouldn't have been before that helped me see around those Corners number eight what are some of the biggest mistakes you see new flippers make and how can you or how can they avoid them having the wrong view of what house flipping is uh thinking that it's about these making these really pretty HGTV type of houses like HGTV is making their money off of entertainment people watching entertainment and obviously it's not going to be as entertaining if they're not making these very nice houses at the end but that's like uh not necessarily what house flipping is there's lots of different strategies to make money off of house flipping or or real estate in general uh so that's one and that kind of goes in line with the idea that people seem to be more concerned with the keeping up with the Joneses and house flipping like what other people will think of them than their bottom line and if you're being you just need to be honest with yourself about that we're here hopefully you're here because you came to make money to be able to invest in you and your family's future and set yourself up in away and break free from like the 9o5 job if that's not what you're here for just be honest with yourself if you're here to make pretty things that's great I love creativity if you're here uh to you know make houses like you would want to live in that's great but that's not focusing first on building a business and by the way we made a whole video on the nine different types of flippers who I know will fail number nine in your experience what are the key factors that determine whether a flip is successful this says if a flip was successful not if it will be success so uh it's simple uh on the back of what I just said there is only one thing that tells you whether a flip was successful or not did it make money did you get more money back than you put in now there are some caveats if you're out there doing Shady stuff and hiding things inside of walls and uh totally disregarding safety and liability well you know the that's a whole different kind of thing that's like uh you know there's always going to be those people out there they're not going to last long they won't stay in business over time eventually that will come back and buy so that that is the one caveat to the only thing that you're using to judge the success of a FL so after all of those criteria are met then did it put more money back in your pocket than you originally had number 10 looking to the Future how do you see the market for house flipping evolving and what plans do you have to adapt your business to these changes well I tell you it seems that a lot more people are becoming interested in the idea of house flipping it's been popularized by the HGTV stuff it's been you know there's been I kind of I question it like is it cuz my eyes have been more open to it or is it actually growing but it seems like more people are interested in wholesaling and there are institutional buyers that are uh all over the place there's Zillow and the uh different house buying big corporations out there and I really don't know what that does over time but I do know that it means there is seemingly a lot more competition to purchase these houses and so you just got to work harder at it you know you have to become a better marketer to find these deals or be willing to overpay for them if you're willing to overpay for them then you have to have ways to make that work like having a better defense on your construction coming up with better strategies but you know I don't see much changing at the end of the day it's pretty simple you uh buy houses at or below market value and have the means to get them to a livable State and then you make profit of it and then you do the next one and eventually you buy and hold and as long as your rent covers all your expenses you hold for as long as you can and that value goes up and you become wealthy it's a simple process that has been working forever and it will continue to work it just may be harder to enter and but it'll be easier in other ways it's always that way you can always find all of the different reasons why you shouldn't do it and uh why the people who have done it had some kind of special advantage and it's all Bs if you want to do it you'll be able to do it you just have to work at it and whatever changes or Evolutions there are in the game it'll all basically be the same okay chat GPT give me 10 more questions here we go how do you find and build relationships with trustworthy contractors and partners in the industry surprisingly enough we've done a whole video on this now I'm going to change this question a little bit because it's different when you're talking about contractors and other vendors and they say Partners I'm not sure if they mean business partners here or just vendors but there are really two main vendors that you're always focused on in this game and that's contractors and wholesaler that's the there are other vendors that you work with like you know suppliers material suppliers uh your CPA your attorney your real estate agent and such but those you tend to get like one and you know of course you want to make that one better all the time you may have like a few different attorneys or a few different bookkeepers based upon different businesses that you have but you know for the most part those stay pretty St AR Through Time whereas with contractors and wholesalers there's higher turnover and you're always building that depth chart because the more of those you have is directly correlated with the ability to scale your business so that's really what we're talking about is contractors and wholesalers but right now I'm going to talk about contractors so how do you find these guys well there's really three different types of contractors there's specific job contractors those are people who do just roofs or just pain or just floors or just siding and windows then there are the all-arounders these are the guys that uh like do everything you know they're not specialized in anything but they'll do the whole job if you ask them to and then there are the U what we call Handyman and handyman in the way that we say it are not exactly the handyman that you have come out to your house they could be but they're kind of like a more skilled all-arounder you know they can actually change out a hot water heater or even wire a house but you wouldn't want to have them wire a house because it's going to be a lot cheaper to have the specific job contractor of the electrician come in and wire the house because handyman has you know High hourly rates and they're not really efficient at that one thing but they can problem solve anything and you know so with that in mind we are just uh we have our depth chart built in our system that is you know electricians plumbers HVAC painters and just we're always outling you're just always outling and recruiting those types of people to add to your depth chart and we you know not all of them are active all the time but anytime I see a painter you know their truck go by I'm putting them in our system and then when it comes to time to get a painter we have our active ones that you know we have good relationships with but you never never know things can always change and when one of those fall off or we grow then we go calling the other ones that are in our system and start to build a relationship with them as far as all-arounders go those are like the uh meat and the potatoes in this business and so you know I'm always looking for active all-arounders and you know there's a certain profile of guys that we go after and uh you know these are generally guys that have a crew of you know like four or less guys because I think when you get beyond that it's harder to manage and so you start to lose efficiency uh the business owner is leading that crew so it's one to four guys and the business owner is leading the crew and maybe he's got like a guy or a girl or whatever I say guy just whoever you know a body that is uh you know running the administrative organization type of stuff uh that's that's generally your best allaround her and uh I'm always looking for those people you know they usually have a work truck or van that has like you know maybe like a logo like one of those magnets on the side but they're not like overly marketed because then you're paying for the marketing but they're also not in like rust buckets to where they're like the maybe the type of person that easily walks off or is always asking for advanced pay I'm looking for somebody that's put together enough but ALS also not I'm not looking for the uh the Rooter company in your town that has a fleet and you know they're coming to your house to upsell you that's not the type of person and we're just always building and working those relationships I'm always thinking about relationship Capital first obviously we're not ones to get uh walked on but I am my first thing that I always think about when I'm dealing with a contractor is uh dang it how could we have cast a better Vision or set better expectations why did this what did I do that made this situation arise and how could I be better next time number 12 what specific Trends are you currently seeing in the real estate market and how do they affect flipping strategy well interest rates are high as hell how about that the only way they affect my strategy though is that it changes the true value of a house we talk about this a lot that you have to understand what the true value of a house is and get it at or below that amount and you know that's really the problem but with higher interest rates the True Value goes down and you have to account for it it's it's as simple as that there's no more to it uh but the high interest rates do not scare me from purchasing do not scare me from purchasing long term interest rates have been higher and I know there's the argument that uh well it's different because the prices are so much higher but at the end of the day it all comes down to underwriting if you get the right deal on the front end and it works with the interest rates then you buy because the only game in town is owning as much property as you possibly can and being able to cover those payments that's how you become wealthy so there is a way to do it you just have to be more cautious and we're certainly more cautious one quick thing is even in the good times you need to be very cautious the biggest problem is getting too far out over your skis and then getting taken out of the game in this game the game of investing in the long term you just have to stay in it and don't get greedy and get taken out of the game if you stay in it you will become wealthy how do you decide between renovating a property versus tearing it down and rebuilding well I never tear it down I think that basically all houses can be saved you need to uh be able to problem solve how houses are put together but I mean I'm not that smart of a person and I can figure out how a house is put together it's like a pretty simple thing and if you understand how it's put together you can understand how it can be fixed so very rarely do I say that a thing has to be torn down and really I generally wouldn't purchase it if it needed to be torn down because all of the advantages that I believe there are in the rehab game are taken away at that point but the advantages are that you can get you can actually find true market value on a house meaning get a better deal on the front end and you can also save money in the rehab not by not by getting people to do things for less but by being smar by problem solving things whereas some most would think uh I have to tear that thing down and rebuild it new or I have to tear all that out and start fresh a uh disease that I call new Builder itis you can problem solve and figure out how you can use what's there and be creative about how to repurpose things and that's where all the money's at and you can't do that once you tear it down you're just like everybody else there's a cost to build things new and the and truly the people that are in that game they get it done for Less because they can offer somebody you know 50 houses and they will get a volume disc so you're competing against that and uh that's just not the road that I wanted to go down for you know I think that in well my uh camera died cuz apparently this is a really long podcast video I was talking about question number 13 how do you decide between renovating a property versus tearing it down and rebuilding the one other thing that I was going to say about that is that with rehabs especially when you're discussing buying and holding these are houses in the best parts of town it's hard to find land in the hottest hottest is the wrong word best parts of town the uh you know most developed neighborhoods and that's what I'm looking for and both flipping and in holding you know in flipping I want to buy I want to buy the house with the most comps so I know exactly what I think I can sell that for and with land obviously you'll find some infill Lots in the city but in my experience most of them aren't great so people are buying these pieces of land like out in the more on the outskirts and it's just a harder thing to comp I know that people are good at it and it works but I've just always felt personally like there's a quite a bit of speculation packed into that and I don't like speculation I like sure things and buying real estate in developed neighborhoods usually in the heart of the city you know the city limits is where it's at 14 how do you balance maintain quality while keeping cost down for medium grade rehabs well to me quality is consistency not what what most people see as quality which is craftsmanship and you know really luxury beautiful finishes I think it is when I show you pictures of a house you can't tell the difference between one house and the other because they look so systematic so identical and that look is based upon what everybody else is doing I don't try to get fancy because fancy is weird and weird is a smaller market and so I want the same lvp T floors that you've seen a million times because that's what buyers and renters have now seen as good once again quality is consistency number 15 what strategies do you use to Market and sell properties once they're ready for Market not really much of anything other than handing it off to the professional so you want to make sure that you're working with a great real estate agent and uh a great property management company and they'll do all that for you they'll you know the market is market so a house is only worth what it can be worth it's not like a great real estate agent is going to get you more than the house is worth but there is a range there the house might be able to sell for 300 to 310 and a great real estate agent will know how to get you 310 more likely they'll know how to play defense to where when you do get under contract you don't lose ground there you know with inspection resolutions and other negotiations with closing costs and Bank inspections and appraisals a great real estate agent will know how to defend your money and then a great property management company will be able to get a renter in Fast and they'll be able to get uh the max amount that the market will allow they'll know what the market will allow for that rent and they'll get it for you there are a few things that I like to do when we put a house up for Market is uh make sure it smells good make sure that you can't see daylight Through the Windows or doors you know like the cracks and uh I really love putting that blue stuff in the toilets cuz I think it makes houses smell and seem nicer more sterile number 16 how do you handle unforeseen complications during a renovation like hidden structural issues or changes in local regulations well the local regulations have definitely caught me uh the city that we're in is definitely an old infrastructure and they're trying to improve and they're going through some growing pains while trying to improve and one of the things that is happening is regulation changes and you really have to stay a breast of that stuff otherwise it will catch you it has caught me and uh they generally have like newsletters or memos that go out especially to contractors uh I might suggest as an investor if you're not also a licensed contractor which most are not and don't need to be uh getting your hands on that newsletter or that email chain and then planning accordingly you know it does you know a regulation just recently came out with uh in our local government where we have to add a cleanout at the house and at the road I mean that adds thousands of dollars to every project and you just have to account for it accordingly when you're buying houses and if you get caught in the middle of a project where that regul changes and it adds to the price tag well that's why you have a financial contingency how do you deal with hidden structural issues well we we've already gone through that in another one of these questions so I won't hit that again but the main thing to remember with all of that is having time on your side is such a necessary thing because surprises are going to come up and when those surprises come up you want to make sure you don't have your back against the wall with time and money so if you have your financial contingency and a Time contingency meaning if you think a project it's going to take four months write it down for eight and that way you don't have your back against the wall where you make a bad decision for the project you want to always make the right decision for the project not because you need more money or need more time number 17 what advice would you give someone interested in transitioning from flipping individual properties to managing a larger scale real estate investment business you have to have systems in place you have to know the type of property that you're going to go after and the process by which you'll follow and you may have your uh house profile down to you know a square footage range the type of uh neighborhood you know the class of neighborhood that you're going to purchase in and you know how much renovation you're going to do or at least what mix you might have a mix where you're going to buy a certain amount that needs less than $10,000 of uh work done to it and a certain mix that's you know the uh 10 to $30,000 that's more like cosmetic whereas under 10 is more like wholetail and then the a certain amount of 30 to 70,000 that's your full Renovations and maybe you even have a certain amount of um additions which I wouldn't do that because that's kind of a different game whereas the first three layers are just different layers of construction um or maybe your game is no construction at all you're only going to do whet tail deals and you're going to do them on you know tighter tighter margins but you know exactly what type of property you're going after and you just keep doing it again and again and again and again you think of anything that requires your problem solving every single time and you figure out a way to make it not require your problem solving and then you or you cut it out you go after something different that's the way that you scale up how do you evaluate number 18 how do you evaluate potential Investments when there is this significant supply chain issues when there are significant supply chain issues our Market fluctuations affecting material availability and prices well you know we did run into some of that during covid where lumber prices were ridiculous but this is just goes back to another reason for rehabs and flipping and you know buying houses buying houses as opposed to buying lots and doing new builds is a big part of the rehab process is I don't need a lot of materials I want to cut out new materials as much as possible and that goes you know towards fighting the disease of new Builder itis where I got to tear it out and restart no you repurpose what is there that's what you think about you become a problem solver and when you do that those types of fluctuations don't matter as much and if you haven't caught it with all of my strategies I'm trying to find things I'm always looking for the things that I can control and I'm cutting out paths that lead to situations where I'm out of control like uh being at the liberty of the supply chain issues number 19 are there any property types or market segments that you tend to avoid and why yes new building I avoid new building why all the reasons that I've said already and I won't hit them again now I'll hit it one more time why do I avoid new building here's one more reason is that I think that we are constantly moving to evolved Technologies and new building a big attraction to new building even for myself is that you can be so systematic in it that you can buy a lot and the only problem solving that needs to be done the only real variable is how you flatten that lot and once you have the lot flattened everything is the same every single time the ultimate process driven thing however with these advancing technologies that means that these Technologies can do your job and that means that ultimately the market will get cut away completely there it won't be about who has the best system in building new builds it will be who has the best robot and I believe that with rehabs and Renovations there's just so much variable to it that I can't foresee how a robot would be able to do that and the other problem is robots learn from you know so this could be learned if there was the information out there but everything needs problem solved and really people in that are out there're doing it really aren't talking about it so there's not the knowledge base to be able to build the problem solving off of eventually it will happen but it I think it's pretty far out whereas I don't think new building is far out and that would change the industry completely for new building I think Renovations are a safe place and I like that number 20 how do you stay motivated and keep your team energized through the challenges of the real estate investment business that is a question that could just as easily be asked about any other type of business it it is just a business like all others and you have to focus on being a great employer that is the job if you decide to take on employees you have taken on a responsibility and you need to treat that as such and there's lots of things that you could say about that but I guess it comes down to this one fact that if I bring on an employee they have made a deal with me that they are going to give their best hours of their best days and work their butts off and in return they should expect something from me and that is to be making sure that I'm responsibly growing the business to give them Security in their job for me to not fool with their personal lives meaning that when they go home for the night they're at home for the night and when they're at work they're at work weekends and the work life balance should exist they should expect to be able to get better that I will invest time in helping them improve maybe helping them find real estate or whatever the business is helping them improve as Business Leaders so they can progress in their career for them not to be stagnant it is my job to make sure that they are not stagnant unless they want to be stagnant okay here we go give me 10 more Chad gbt looks like I got to go look at a house a little bit later today here we go 21 through 30 number 21 how do you ensure compliance with local building codes and regulations throughout the renovation process well it's a great question a huge advantage of Renovations rehabs is that there is this grandfathering thing that happens basically if something was built to code when it was built that it will be grandfathered in even though the codes have changed and that line is kind of like uh moving goalposts but we're always trying to find that line because that's where you are able to really save money on a rehab that is not to say uh cutting corners and hiding things and avoiding safety and liability concerns this is actually using things that at one time were good and they're probably good now you know houses were well built uh years ago and they'll still withstand even though the codes may have changed and so you're trying to find that line of grandfathering and you know a lot of times there's this balance because you don't want the uh codes enforcements to think that you're shady but you also don't want to overdo it because if you overdo it you overspend and if you overspend you don't make profit if you don't make profit you don't stay in the game so the balance is you do what you think is reasonable and then you call for inspections and if you fail them you fix the things it's really that simple I would consider a firsttime pass on a inspection as a failure unless I barely passed it's uh you know I think I overdid it if that happens number 22 what role does technology play in your daily operations from Project manag to marketing completed properties well I was kind of already asked that question but I use an array of air table is where most of our stuff is run from but we also use notion and then in marketing completed properties actually in our property management company we use AppFolio and in the real estate brokerage uh we kind of use this um software for managing the transaction coordination but mostly we just use airable and actually monday.com from that was like a old one that we used we also use uh old Technologies like whiteboards and notebooks crazy stuff number 23 can you share a particularly memorable or challenging flip that you've
completed uh we'll be cutting that bad word out of there all right number 23 can you share a particularly me able or challenging flip that you've completed and how you navigated that project okay well 625 Pontiac was the deal that changed me that was in Denver and basically what had happened is I I thought being a flipper meant you do Renovations therefore being a better flipper meant you do bigger and bigger Renovations so I was like taking roofs off and building second stories doing these humongous Renovations I had a huge internal crew and uh you know just kept growing bigger and bigger and bigger I thought you had to do bigger projects and have huge profit margins on these things and anyway it finally caught me and you know I didn't underwrite a deal properly because I didn't know what the hell I was doing in underwriting properties and I also I changed horses Midstream decided to do a much bigger renovation than I had originally set out to do so I had to pay you know an architect to change the plans that I already paid for and then a structural engineer ultimately I ran out of money had to do the whole thing myself uh and during that project this guy bought a house across the street and he went in there and he you know had hired a few contractors and they did like some cabinet work some countertop work he put in new floors did some new paint I mean it was probably like a $30,000 renovation and then he sold that property for way more than he bought it for you know he didn't get a particularly good deal on the front end either um but he made more money on that project by far than I made on this huge project that took me you know over a year to complete and I just go I would go to that job site every day and I knew that once I sold it I was actually going to lose money so I'd you know take my losses when I finally sold it I had to like sell off things borrow money from you know lenders or whatever and just every day it was like my prison sentence I got to go to that property to work and think about all the stupid decisions that I made and think about how ultimately you know I would do it differently if I did it again and I didn't do it again right away I actually I think I kind of quit licked my wounds for a while but anyway I came back uh pissed off and stronger than ever and that's really like where these systems came from it was a beautiful house though but as I've mentioned that's not where the money's at I say this often that I uh you know I used to build some really beautiful full houses we would like really do some great Renovations that you would really be proud of and then I decided I wanted to make money and that's where these systems came from number 24 how do you Foster relationships with real estate agents lenders and other key stakeholders in the flipping process well we've already answered that question number 25 what steps do you take to protect your investment properties from potential legal issues or disputes it's a great question want to start by saying obviously I'm not an attorney but I uh do pay one and you know just the corporate structures that are out there for people that take on uh do two things they give you different tax shelters or strategies and they give you liability protection they also just give you General organization you know you set up a corporation or an LLC that separates things from you personally um but it's really that simple you know you set it up in a different entity like an LLC or or an sc Corp which is you know a tax election for an LLC but some people do c Corps which is a totally separate entity those things you should talk with you you need to really balance between Insurance legal and taxes so you need to talk with your strategist there but just separating it from you personally and actually separating it meaning not to co-mingle funds and and such uh gives you a a great advantage on protecting yourself personally and your family and then secondly is hiring a property management company because they're going to take the liability for a lot of the stuff that you might be concerned with with tenants and